United States v. Yihao Pu
2016 U.S. App. LEXIS 3224
| 7th Cir. | 2016Background
- Yihao Pu, a quantitative finance professional, copied proprietary HFT-related files from two employers ("Company A" and Citadel) to personal devices while employed by each; some files were source code, others were output data (alpha, alpha-term, R/C files).
- Pu pled guilty to one count of unlawful possession of a Company A trade secret and one count of unlawful transmission of a Citadel trade secret; no actual monetary loss resulted from his trading (he lost about $40,000 personally).
- The PSR and government attributed development costs for the stolen items as intended loss: roughly $2.6 million for Company A and $10.1 million for Citadel, yielding a $12.3 million intended-loss figure.
- The district court adopted the PSR, applied a 20-level enhancement based on intended loss under U.S.S.G. §2B1.1, but imposed a downward variance to 36 months' imprisonment (below the guidelines range). The court ordered $759,649.55 restitution to Citadel for internal-investigation costs.
- On appeal the Seventh Circuit found (1) the record lacked evidence that Pu intended to cause a loss equal to development costs, so the intended-loss finding was clearly erroneous, (2) the district court failed to address Pu’s non-frivolous arguments (including that he only took outputs, not source code), and (3) the restitution award rested on an incomplete accounting of investigation costs and must be vacated.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether intended loss can be set equal to full development cost of trade secrets | Gov: development cost is appropriate metric to estimate intended loss for proprietary information | Pu: he stole outputs (not source code) and there is no evidence he intended victims to suffer a $12M loss; intended loss should be zero or minimal | Reversed: district court’s $12M intended-loss finding was clearly erroneous because the record lacks evidence Pu intended that loss amount; remand for resentencing |
| Whether district court properly considered defendant’s factual arguments/evidence | Gov: PSR findings adopted; defendant did not rebut with sufficient evidence | Pu: submitted expert report and raised non-frivolous arguments that the court did not address (e.g., component‑parts vs. source code value) | Reversed: court erred by failing to address non‑frivolous arguments and evidence; remand required |
| Whether restitution to Citadel was supported by a complete accounting of investigation costs | Gov: letter from Citadel itemized total fees and stated amounts excluded civil‑litigation counsel | Pu: letter lacks detail (hours/tasks/invoices) and may include civil‑case costs; insufficient proof of reasonableness and causation | Reversed: restitution vacated because government failed to provide a complete accounting; remand for proper proof and recalculation |
| Whether a conviction requires a finding of economic loss | Gov: conviction permits restitution and loss findings under guidelines | Pu: statute and guidelines do not mandate economic loss greater than zero; intended loss must reflect defendant’s mens rea | Court: addressed as legal question — no economic‑loss finding is required by conviction; decision unnecessary to reversal but guidance provided for remand |
Key Cases Cited
- United States v. Domnenko, 763 F.3d 768 (7th Cir. 2014) (standards for reviewing loss determinations and sentencing procedure)
- United States v. Berheide, 421 F.3d 538 (7th Cir. 2005) (government must prove intended loss by preponderance; remand when intended‑loss finding unsupported)
- Gall v. United States, 552 U.S. 38 (2007) (requirements for sentencing procedure and explanation of chosen sentence)
- United States v. Hosking, 567 F.3d 329 (7th Cir. 2009) (restitution must be based on a complete accounting of investigative costs; require detail and proof of reasonableness)
- United States v. Higgins, 270 F.3d 1070 (7th Cir. 2001) (intended loss measured by defendant’s subjective intent)